BILL ANALYSIS Ó SB 78 Page 1 SENATE THIRD READING SB 78 (Budget and Fiscal Review Committee) As Amended June 13, 2013 2/3 vote. Urgency SENATE VOTE :Vote not relevant SUMMARY : Reinstates a tax on Medi-Cal managed care organizations, for which revenue and General Fund savings are included in the Budget Act of 2013. Specifically, this bill : 1)Imposes a tax, in 2012-13, for which the tax rate would be equal to the gross premiums tax (2.35%) to generate $128.1 million General Fund savings. 2)Requires current year revenues to be directed to the Healthy Families Program. 3)Authorizes a General Fund loan to the Managed Risk Medical Insurance Board to cover the costs of the Healthy Families Program until this tax revenue is received. 4)Imposes a tax, in 2013-14 and beyond, at a rate equal to the state sales and use tax rate (3.9375%), for approximately $342.9 million in General Fund savings on an ongoing basis. In the budget year, it is projected that the Managed Care Organization (MCO) tax would generate $644 million in revenue, half of which would be used to draw down federal Medi-Cal funds and used to pay back Medi-Cal managed care plans. The other half of these funds would be used to offset General Fund expenditures for Medi-Cal managed care rates for children, seniors and persons with disabilities, and dual eligibles. 5)Includes a sunset of three years. 6)Protects the tax from the Bradley-Burns local sales tax, which prevents local communities from the ability to increase the tax. 7)Provides that the payment of the tax by plans is dependent on the state meeting its obligation to pay plans appropriately. 8)Stipulates the repeal of the tax if it is successfully challenged or rescinded. SB 78 Page 2 9)Requires that the tax be collected by the Board of Equalization and that tax revenue received and allocated be reconciled quarterly. COMMENT : This bill is a budget trailer bill within the overall 2013-14 budget package to implement actions taken affecting the Department of Health Care Services and the Managed Risk Medical Insurance Board. Analysis prepared by : Andrea Margolis / BUDGET / (916) 319-2099 FN: 0001197